Ross Stores Inc. on Wednesday reported sales for the 13 weeks ended February 2 were $4.1 billion, with comparable store sales up 4 percent over the 13 weeks ended February 3, 2018. This increase was on top of a 5 percent gain in last year’s fourth quarter.
Similar to other retailers, fiscal 2018 was a 52-week year compared to 53 weeks in fiscal 2017. The extra week added approximately $219 million in sales and $.10 to earnings per share in 2017’s fourth quarter and fiscal year. Further, the 53rd week added about 70 and 20 basis points, respectively, to operating margin in last year’s fourth quarter and fiscal year.
Earnings per share for the 13 weeks ended February 2, 2019 were $1.20, versus $1.19 in the 14 weeks ended February 3, 2018. Net earnings for the 13 weeks ended February 2, 2019 were $442 million, compared to $451 million in the 14 weeks ended February 3, 2018.
For the 52 weeks ended February 2, 2019, earnings per share grew to $4.26, compared to $3.55 in the 53 weeks ended February 3, 2018. Net earnings for the 52 weeks ended February 2, 2019 were $1.6 billion, compared to $1.4 billion in the 53 weeks ended February 3, 2018. Sales for the 52-week 2018 fiscal year grew 6 percent to $15.0 billion, with comparable store sales up 4 percent above a 4 percent gain in fiscal 2017.
Earnings per share results for both the 2018 fourth quarter and fiscal year reflect a one-time, non-cash gain of $.07 related to the favorable resolution of a tax matter as well as a $.19 benefit from tax reform legislation in the fourth quarter and $.70 for the year. Prior year earnings results for the 2017 fourth quarter and fiscal year included the aforementioned $.10 benefit from the 53rd week and a $.21 benefit from tax reform legislation.
Barbara Rentler, Chief Executive Officer, commented, “Sales and earnings for both the fourth quarter and fiscal year outperformed our expectations. We achieved these results despite our own challenging multi-year comparisons and weakness in our Ladies apparel business during the holiday season.”
Rentler continued, “Though above plan, fourth quarter operating margin of 13.2 percent was down from last year due to the 53rd week comparison and increases in freight and wage costs, as expected.”
Board Approves New Two-Year $2.55 Billion Stock Repurchase Program and 13 percent Increase in Quarterly Cash Dividend
The company’s board of directors authorized a new program to repurchase $2.55 billion of its common stock over the next two fiscal years. At recent stock prices, this new repurchase program represents about 8 percent of the company’s total market value and a 31 percent increase over the prior two-year $1.95 billion authorization that was completed in January 2019.
The Board also approved an increase in the quarterly cash dividend to $.255 per share, up 13 percent over the prior year. This higher quarterly dividend is payable on March 29, 2019 to stockholders of record as of March 18, 2019.
Rentler noted, “The increases to our shareholder payouts for 2019 reflect the current strength of our balance sheet and our ongoing ability to generate significant amounts of cash after funding growth and other capital needs of the business. We have repurchased stock as planned every year since 1993 and raised our cash dividend annually since 1994. This consistent record reflects our ongoing commitment to enhancing stockholder value and returns.”
A total of 12.5 million shares of common stock were repurchased during fiscal 2018, for an aggregate purchase price of $1.075 billion. During the recently completed fourth quarter, 3.1 million shares were repurchased for a total price of $268 million.
Fiscal 2019 Guidance
Looking ahead, Rentler said, “While we hope to do better, we continue to take a prudent approach to forecasting our business for 2019. Although we remain favorably positioned as an off-price retailer, we face our own difficult sales and earnings comparisons, a very competitive retail landscape, and an uncertain macro-economic and political environment.”
For the 52 weeks ending February 1, 2020, the company is planning same store sales to grow 1 percent to 2 percent on top of 4 percent gains in each of the past four years. We also plan to open about 100 new stores this year, consisting of approximately 75 Ross Dress for Less and 25 dd’s DISCOUNTS locations. Fiscal 2019 earnings per share are projected to be $4.30 to $4.50, up from $4.26 for the 52 weeks ended February 2, 2019.
Given the recent underperformance in Ladies apparel, we are forecasting comparable store sales for the 13 weeks ending May 4, 2019 to be flat to up 2 percent. Earnings per share are projected to be $1.05 to $1.11, versus $1.11 for the first quarter ended May 5, 2018. This period’s earnings forecast includes expectations for a negative impact from the timing of packaway-related expenses that benefited last year’s first quarter along with higher freight and wage costs.
